I've been messing around with Avids and Kitfoxes now since 1987, and still own the first Avid ever built, powered by a 43 hp Cuyuna 2 stroke that was normally used in Scorpion snowmobiles. And even though only 43 hp, it flew very well, and enjoyed a solo rate of climb of nearly 1500 fpm. Of course it only weighed 360 lbs, so it just goes to prove how critical overall weight, and even more so engine weight, is on this aircraft design.
And for any of you that didn't know this, when Dean Wilson designed our airframe, he discovered that if he could eliminate 1 pound of weight from the engine, he could remove 2 lbs of weight from the airframe, and the aircraft would remain just as strong as a standard, more conventional aircraft. So engine weight matters a lot more in this design than with a more conventional aircraft.
So reverse that design feature by installing heavy engines, and you have totally defeated what the designer sought to create with his revolutionary concept. So remember, it isn't just performance that will suffer with a heavy engine, airframe strength will also be compromised.
That 532 can be used just fine as it came from the factory. Mine was bone stock and worked great for years. My other A-model Avid with the 532 weighs only 396 lbs and has a climb rate of over 2200 fpm, seriously! It is one hauling machine. So I don't think you could find a more effective (and fun) low cost option than the 532 for an Avid. But do everything you can to keep it light - that will make it a real hotrod. Modifications? You can easily live with the standard ignition points if you decide making it electronic is too much work. My 532 never had electronic ignition, nor did the one that went to the north pole. But I would recommend at least resealing an engine that has laid around for a bunch of years inactive. And at the same time, I would also recommend doing the upgrade (s) to the rotary valve seal and the water pump (I don't remember all the details so ask a Rotax engine guy).
Anyhow, the 532 is overall a great engine that worked very well on early Avids and Kitfoxes, and a lot were used. But it is still a two stroke and doesn't have the track record for reliability the 4 stroke Rotaxes enjoy.
However, like I always tell my friends that make jokes about friends flying 2 strokes "We should all fly everything like it has a two stroke up front, as any engine can quit". I've had 5 engine failures in aircraft in the past 30 years...2 were 2 strokes, and the other 3 were aircraft engines. So even 4 stroke reliability can be questioned...